Apple responds: we want a cut of Amazon, Sony e-book sales

Apple has responded to speculation that its App Store policies could bar …

Apple has responded to the furor over its supposed App Store policy changes that many believe could affect the popular Kindle, Nook, and Sony Reader apps. The company claims it has not changed any of its guidelines given to developers, but it indirectly confirms that accessing content purchased elsewhere could be a no-no if that content isn't also available to be purchased through Apple's own system.

"We have not changed our developer terms or guidelines," Apple spokesperson Trudy Muller told Ars. "We are now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase."

Buzz began Tuesday morning when the New York Times said that Sony's e-reader app had been rejected, citing Apple's restriction on in-app book purchases. This in itself was not a new policy—Apple doesn't allow apps to sell content to users unless that content passes through the official Apple ecosystem, where Apple gets a 30 percent cut.

Apple also allegedly told Sony that the app couldn't access content purchased on other Sony Reader devices, which is where most of the outrage was focused. Amazon's Kindle app and Barnes & Noble's Nook app are both popular mechanisms for users to download and read books that they have purchased from the respective stores. Many feared that this supposed change in Apple policy would take their e-books away from their iPads, iPhones, and iPod touches.

Apple's second statement indicates that this is indeed the case—sort of. If an app lets users access content that they purchased via Amazon's website, for example, then that same app must also let users buy the same book via Apple's own in-app purchase system. If the app developer doesn't want to use Apple's in-app purchases to sell content, then the app can't access content purchased elsewhere either.

This is notable because it will require Amazon and Barnes & Noble (as well as Sony, whose iOS app is not yet available) to change how their offerings work. Apple wants its 30 percent share of content sales whenever possible.

Amazon has already gone all-in with its "Buy Once, Read Everywhere" tagline, so it probably can't afford to back out of the iOS platform now. The alternative appears to be an user interface nightmare: re-structuring its sales mechanisms in order to allow customers to buy from both Amazon and Apple (a move that will chafe Amazon execs) or from Apple alone (even more chafing).

Sony, for its part, still has not responded to our requests for comment. The company did post a note on its website, however, noting that it has "opened a dialog with Apple to see if we can come up with an equitable resolution but reached an impasse at this time." The company says it's exploring other ways to bring its Reader to iOS devices, indicating that it may try other routes in order to avoid the App Store tax.

438 Reader Comments

This stuff about forced or not forced is a red herring. You buy a smartphone, it has a browswer and it runs software. You Should expect to be able to do what you want on the browser or on the software without some pirate popping up and sticking their hand out to demand a toll.

There is such a thing as going to far and we're deep in that territory by now. No computer or phone maker has any business looking for a cut of anything I buy via browswer. Its just out of order.

Apple isn't asking for a cut of anything you buy via browser.

Good news, because that's how Amazon sells you those eBooks, through the browser. Then there shouldn't be an issue right?

That's the issue entirely. Apple is saying that they are going to require Amazon to sell through the app or else their app isn't allowed to access things sold through the browser.

Congrats, Apple! Unless this policy changes I won't be buying an iPad.

Way to take a stand! Boycott Apple until Sony gets 100% of your e-book money! Don't let that nasty Steven P. Jobs have even a penny of what is rightfully Sony's cash! Demand that all iOS apps download content to the App bundle, just like Sony's does, so that you can't transfer it to any other device! Anything less is selling out your principles!

NOTE TO APPLE: A 30% cut of someone else's PRICE (> gross margin) for doing precisely NOTHING?• No network bandwidth supplied by Apple• No marginal benefit from Apple's "app" search features• No effort or expense taken by Apple whatsoever

So someone else does all the work; and then Apple takes a cut that might even be larger than the profits made by the worker himself from his own labours? Totally immoral and I won't have anything to do with it. Change course, Apple, and don't try it on again; or find yourself rapidly losing desirability. I'm impressed with some of your software (which implements, amongst many other things, ideas I had about fifteen years ago); but as long as I think your business model is unethical, I'm not going anywhere near your company's products. I won't buy them, won't develop software for them, won't recommend them and won't set foot inside your stores for as long as I believe your actual business practices fall short of the image you are hypocritically trying to project. Clean up your business practices, and I'll play ball.

Ars, this is some of the worst reporting that I have ever seen on this site. I am so glad that I ran across this news on AppleInsider first, which summarized and linked to a report on The Digital Daily by John Paczkowski, whom also talked to Trudy Muller.

However, he came to the proper conclusion from what she said instead of this erroneous conclusion which is stirring up a lot of hatred for little reason. They also went on to point out in their article EXACTLY why Apple is doing this, with references to the past where they ended up on the short end of the stick by not keeping control of their developer market (see Adobe which rose to prominence on the Mac and then abandoned it when they found it most beneficial).

Here are the facts of this story as quoted from John Paczkowski:

Quote:

“We have not changed our developer terms or guidelines,” company spokesperson Trudy Muller told me. “We are now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase.”

In other words: You don’t have to buy books, or music, or other media that you consume on iOS apps from Apple. But developers must offer you the option to buy that stuff through Apple and its iTunes-backed system.

I know that a few readers here caught that as well. Apple is not forcing anyone to buy their content through the App Store, they are simply stating that they have to offer the option of purchasing through the App Store. Also, I do not recall anything in the policy about price comparisons. Therefore, it is perfectly legitimate to say that anyone can charge more from the in-app purchases then purchases from your own network.

Oh, and for all of you that think Android is your savior from this new curated and walled-garden approach to app purchases think again. Within the last week Google's Android platform manager, Eric Chu, told Forbes' Oliver Chiang that he (speaking in an official capacity for Google) "wants to clean up Android Market, saying there is a team tasked with 'weeding out apps that violate Android Market’s terms of service,' an indication that Google's free-for-all market design is recognized to have serious drawbacks." Android users, welcome to your future, a curated and controlled App Store.

In the end though, it is very simple. If you don't like the policy don't buy Apple products. However, be prepared for others to follow suit, because like it or not Apple is doing VERY well in a market that has in general been hurting. So, others are going to mimic their tactics as much as possible.

Apple does run iTunes at cost. Apple does not make any appreciable profit from iTunes, at the same time they don't want to loose money on iTunes either. In fact Apple makes very little money from any of its software, its all value for the hardware.

People are still free to buy e-books directly from Amazon and B&N if they choose.

matthevil wrote:

That's great, so if it is so insignificant why don't they run iTunes at cost and refund any actual profits resulting in their 30% cut back to the content owners? I'm sure the record labels would love that.

It also just makes another point. The majority of their profit does come from hardware sales. Is that somewhere in those earnings? So the fact that they can entice the Kindle community away from a Kindle and to at least a $499 iPad (with a nice margin reflected in those earnings), all the while having not paid for Amazon's infrastructure (or the delivery bandwidth from Amazon servers) should be a good thing right? What do you call it? Mutually beneficial.

To add some context the iPhone has 4% of the mobile phone market. To all of those shouting anti-trust.

The iPad does have 80% of the tablet market. But that's only because most other tablets currently suck, that's not Apple's fault.

jonabbey wrote:

Sure, businesses are absolutely meant to be profit-seeking entities. They are also meant to be disciplined by competition in the market, which Android is doing for Apple. So long as Apple does not obtain monopoly (exclusionary) leverage over smart phones and/or tablets, they can try to do anything that they think will make them a buck.

I'm curious, is the Amazon e-book store available to all other countries?

It doesn't make Apple evil. It makes its customers upset. What are you not getting here....

So if Amazon raises the prices of e-books sold on their own website then Apple's customers get upset at Apple? What if I'm not an Apple customer? Should I get upset at Apple because Amazon raised their prices?

" If an app lets users access content that they purchased via Amazon's website, for example, then that same app must also let users buy the same book via Apple's own in-app purchase system. If the app developer doesn't want to use Apple's in-app purchases to sell content, then the app can't access content purchased elsewhere either. "

As I am reading it, Apple is NOT saying I MUST buy ONLY from Apple's store. What they are saying is I have to be given access to Amazon/Sony/whatever store via BOTH their app and Apple's.

In a nutshell:

Sony wants to sell its content to a very popular platform and keep the whole revenue stream. Apple thinks Sony is taking advantage of the platform/ecosystem Apple has carefully built up and wants a cut.

I can see both sides. What I don't see the reason for all the sturm und drang.

To add some context the iPhone has 4% of the mobile phone market. To all of those shouting anti-trust.

The iPad does have 80% of the tablet market. But that's only because most other tablets currently suck, that's not Apple's fault.

jonabbey wrote:

Sure, businesses are absolutely meant to be profit-seeking entities. They are also meant to be disciplined by competition in the market, which Android is doing for Apple. So long as Apple does not obtain monopoly (exclusionary) leverage over smart phones and/or tablets, they can try to do anything that they think will make them a buck.

To be fair, the mobile phone market is a super set of the smart phone market which is more directly affected in the App Store space. I don't know the percentage on that one but it's higher than 4%. I don't believe this is actually near the realm of Anti-trust so much as just anti-competitive. And I don't believe you can do anything about anti-competitive practices if the entity isn't itself a monopoly (Anti-Trust).

This stuff about forced or not forced is a red herring. You buy a smartphone, it has a browswer and it runs software. You Should expect to be able to do what you want on the browser or on the software without some pirate popping up and sticking their hand out to demand a toll.

There is such a thing as going to far and we're deep in that territory by now. No computer or phone maker has any business looking for a cut of anything I buy via browswer. Its just out of order.

Apple isn't asking for a cut of anything you buy via browser.

Good news, because that's how Amazon sells you those eBooks, through the browser. Then there shouldn't be an issue right?

That's the issue entirely. Apple is saying that they are going to require Amazon to sell through the app or else their app isn't allowed to access things sold through the browser.

In the end though, it is very simple. If you don't like the policy don't buy Apple products. However, be prepared for others to follow suit, because like it or not Apple is doing VERY well in a market that has in general been hurting. So, others are going to mimic their tactics as much as possible.

Another curious question - How does this affect a situation, say, where the affected book publisher has no previous agreement with Apple? For instance, Amazon signs an agreement with XyZ Publishing, but now has to offer the books via the iTunes store .... which XyZ Publishing did not agree to.

To add some context the iPhone has 4% of the mobile phone market. To all of those shouting anti-trust.

The iPad does have 80% of the tablet market. But that's only because most other tablets currently suck, that's not Apple's fault.

jonabbey wrote:

Sure, businesses are absolutely meant to be profit-seeking entities. They are also meant to be disciplined by competition in the market, which Android is doing for Apple. So long as Apple does not obtain monopoly (exclusionary) leverage over smart phones and/or tablets, they can try to do anything that they think will make them a buck.

Your understanding of antitrust laws is severely lacking.

Apple is leveraging a monopoly position (control of all iOS applications) to unfairly disadvantage a competitor in another sector (iBooks vs Kindle). Two examples of similar cases: Internet Explorer bundling (banning of Netscape), and Google Adsense prioritizing. Microsoft utilized their monopoly (sole provider of the critical Windows Operating System) to unfairly disadvantage their competitor (Internet Explorer vs Netscape Navigator), were found liable, and forced to pay by the antitrust court. Google's case is ongoing.

The iPhone is 17% of the smartphone market. There is plenty of competition for consumers to choose from.

Apple is competing directly against the Kindle and the Nook. Both are doing well in the market. Where do you see the problem?

matthevil wrote:

To be fair, the mobile phone market is a super set of the smart phone market which is more directly affected in the App Store space. I don't know the percentage on that one but it's higher than 4%. I don't believe this is actually near the realm of Anti-trust so much as just anti-competitive. And I don't believe you can do anything about anti-competitive practices if the entity isn't itself a monopoly (Anti-Trust).

It doesn't make Apple evil. It makes its customers upset. What are you not getting here....

So if Amazon raises the prices of e-books sold on their own website then Apple's customers get upset at Apple? What if I'm not an Apple customer? Should I get upset at Apple because Amazon raised their prices?

If Apple treats some online purchases different than others, then you should be upset with Apple.I won't respond again WS3- you are clearly a troll.

I'm impressed with some of your software (which implements, amongst many other things, ideas I had about fifteen years ago);

"Your software is really great precisely because it uses my own very awesome designs, which unfortunately never progressed beyond the stage of being figments of my imagination but which, nonetheless prove my great foresight and genius."

Good Show!

matthewslyman wrote:

I won't buy them, won't develop software for them, won't recommend them and won't set foot inside your stores for as long as I believe your actual business practices fall short of the image you are hypocritically trying to project.

The iPhone is 17% of the smartphone market. There is plenty of competition for consumers to choose from.

... Where do you see the problem?

No one would ask this if Google pulled this shit with Android. The problem is no different than it was when the iPhone came out- the walled garden for apps is bad for consumers and this is only further proof.

iOS is a small percentage of a large and competitive market. Apple has done nothing to stifle or prevent others from succeeding in the market. Android, Kindle, Nook are all selling well.

Windows is by a large margin the dominant operating system. MS purposefully and systematically set out to eliminate and destroy its competitors. That is the reason they had charges of anti-trust.

squidz wrote:

Your understanding of antitrust laws is severely lacking.

Apple is leveraging a monopoly position (control of all iOS applications) to unfairly disadvantage a competitor in another sector (iBooks vs Kindle). Two examples of similar cases: Internet Explorer bundling (banning of Netscape), and Google Adsense prioritizing. Microsoft utilized their monopoly (sole provider of the critical Windows Operating System) to unfairly disadvantage their competitor (Internet Explorer vs Netscape Navigator), were found liable, and forced to pay by the antitrust court. Google's case is ongoing.

I'm curious, is the Amazon e-book store available to all other countries?

Many. The issue is that book publishing deals are very regional, so it's not as simple as just enabling payments and infrastructure for a country. For example, typically an entirely different publisher has the rights to a book in the UK as in the US, and it's the same for the rest of the world.

iOS is a small percentage of a large and competitive market. Apple has done nothing to stifle or prevent others from succeeding in the market. Android, Kindle, Nook are all selling well.

Windows is by a large margin the dominant operating system. MS purposefully and systematically set out to eliminate and destroy its competitors. That is the reason they had charges of anti-trust.

squidz wrote:

Your understanding of antitrust laws is severely lacking.

Apple is leveraging a monopoly position (control of all iOS applications) to unfairly disadvantage a competitor in another sector (iBooks vs Kindle). Two examples of similar cases: Internet Explorer bundling (banning of Netscape), and Google Adsense prioritizing. Microsoft utilized their monopoly (sole provider of the critical Windows Operating System) to unfairly disadvantage their competitor (Internet Explorer vs Netscape Navigator), were found liable, and forced to pay by the antitrust court. Google's case is ongoing.

The iPhone is 17% of the smartphone market. There is plenty of competition for consumers to choose from.

Apple is competing directly against the Kindle and the Nook. Both are doing well in the market. Where do you see the problem?

matthevil wrote:

To be fair, the mobile phone market is a super set of the smart phone market which is more directly affected in the App Store space. I don't know the percentage on that one but it's higher than 4%. I don't believe this is actually near the realm of Anti-trust so much as just anti-competitive. And I don't believe you can do anything about anti-competitive practices if the entity isn't itself a monopoly (Anti-Trust).

This is just all from a consumer point of view.

The problem is that Apple is benefiting from the Kindle app in hardware sales.

The Kindle and Nook don't apply because these devices were not created and marketed as portable computing devices but a single focus e-reader. Apple created the iPad (iPhone to some extent) to be just that. A portable computing device with apps galore to go along with it. And it succeeded in that.

They also marketed heavily on the fact it too can be an e-reader but now it wants sole control of the e-reading capability. So which is it? Is the iPad a device to control the e-reading market with the bonus of apps, music etc? Or is the iPad supposed to be a portable computing device that lets you choose what apps to put on it?

It seems like a bit of identity crisis at this point. It also seems like an attempt to leverage the device for a cut of Amazon sales that cost Apple nothing except for iBooks sales in return. This is definitely anti-competitive and it smacks of disbelief that iBooks can tackle Amazon which is a shame since I would expect more of Apple.

Legal ramifications, I don't give a crap. Like I said, point of view from a consumer.

I'm curious, is the Amazon e-book store available to all other countries?

Many. The issue is that book publishing deals are very regional, so it's not as simple as just enabling payments and infrastructure for a country. For example, typically an entirely different publisher has the rights to a book in the UK as in the US, and it's the same for the rest of the world.

Ah, k. Thanks. I was under the initial impression that it was US-only.

Also, what mknopp said. Not to dogpile on the Ars staff, whose writings I generally enjoy but this:

Quote:

Apple also allegedly told Sony that the app couldn't access content purchased on other Sony Reader devices, which is where most of the outrage was focused. Amazon's Kindle app and Barnes & Noble's Nook app are both popular mechanisms for users to download and read books that they have purchased from the respective stores. Many feared that this supposed change in Apple policy would take their e-books away from their iPads, iPhones, and iPod touches.

Apple's second statement indicates that this is indeed the case—sort of. If an app lets users access content that they purchased via Amazon's website, for example, then that same app must also let users buy the same book via Apple's own in-app purchase system. If the app developer doesn't want to use Apple's in-app purchases to sell content, then the app can't access content purchased elsewhere either.

The first sentence of the second paragraph is provocative at best, somewhat deceptive, and opinion-based rather than factual. It confuses the issue and judging by the comments here, boy, do people need all the help they can get in comprehension. I am fine with you guys' stating your opinion, but in MY opinion it should be summarized in a concluding paragraph; stick with pure reporting in the main text.

Since their really is no one clear definition of what is Android. There really is no coordinate way Google could even do this.

Yes I see that going from no successful mobile app market, to one with 420,000 apps and over 1 billion downloads, clearly proves Apple is doing it all wrong.

eric_of_earth wrote:

No one would ask this if Google pulled this shit with Android. The problem is no different than it was when the iPhone came out- the walled garden for apps is bad for consumers and this is only further proof.

Next Ars article should be something along the lines of "Reading comprehension at its lowest in decades"

"Apple spokesperson Trudy Muller told Ars. "We are now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase."

Where does that say that apple 'prohibits' any sales unless they get a cut?!? They simply require that the books are available both within the app and outside of the app. The user is to choose.

The big question is: can the pricing differ? Could Amazon offer a book for $7.99 through its website and $11.41 through Apple?

Both companies have shown in the past that they're willing to play hard, but Amazon has a bigger trump card here, since any move to ban the Kindle app will hand Apple a ton of negative press.

Two words: agency pricing. Which, surprise, Apple helped institute! That means the book must sell for the same amount no matter where it's sold! So Amazon would have to offer it for $7.99 through Apple, too. Wonder who would end up paying the extra 30%?

And this is where it bothers me. I don't own a single iOS or Apple device, but I'm going to end up footing the bill on the Apple tax to read on my Kindle/Android/PC.

I highly doubt Apple will allow in-app purchases to not have price parity with external purchases.

Apple is leveraging a monopoly position (control of all iOS applications) to unfairly disadvantage a competitor in another sector (iBooks vs Kindle). Two examples of similar cases: Internet Explorer bundling (banning of Netscape), and Google Adsense prioritizing. Microsoft utilized their monopoly (sole provider of the critical Windows Operating System) to unfairly disadvantage their competitor (Internet Explorer vs Netscape Navigator), were found liable, and forced to pay by the antitrust court. Google's case is ongoing.

I'm an Apple user and I don't like this decision at all, but I think its you who isn't exactly an expert in anti-trust. Having absolute control of iOS in no way makes Apple a monopoly. The relevant market is "mobile devices" of which iOS is, as was quoted before, around 4%. Even if you use the market of "smartphones" Apple doesn't even have a plurality never mind a majority or monopoly. Even if you look at "mobile devices that are capable of displaying ebooks", which might be the most salient category Apple has the market share lead in, its still not a majority.

No US court is even remotely going to give Apple the anti-trust slap down on this one.

It doesn't make Apple evil. It makes its customers upset. What are you not getting here....

So if Amazon raises the prices of e-books sold on their own website then Apple's customers get upset at Apple? What if I'm not an Apple customer? Should I get upset at Apple because Amazon raised their prices?

If Apple treats some online purchases different than others, then you should be upset with Apple.I won't respond again WS3- you are clearly a troll.

You seem to be claiming that Apple shouldn't treat purchases through Apple's in-app purchasing system any differently than purchases through third-party website.

That means either: 1) Apple takes no cut from purchases through their in-app purchasing system or 2) Apple also receives a cut of purchases made through third-party websites.

"Flamebait -1" on the title, and based on the number of posts, good job!

Apple said that if alternate distribution (such as through the web, etc) is used, then is must also be available for in-app purchase.

"if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase."

Nowhere did they say "exclusively for in-app purchase". They're not requiring a cut, and the title of this article is blatantly NOT what Apple said. I see this as they want to keep the iOS experience seamless - and "jump out to Safari to buy books then jump back to the app to read them" isn't seamless.

The iPhone is 17% of the smartphone market. There is plenty of competition for consumers to choose from.

Apple is competing directly against the Kindle and the Nook. Both are doing well in the market. Where do you see the problem?

matthevil wrote:

To be fair, the mobile phone market is a super set of the smart phone market which is more directly affected in the App Store space. I don't know the percentage on that one but it's higher than 4%. I don't believe this is actually near the realm of Anti-trust so much as just anti-competitive. And I don't believe you can do anything about anti-competitive practices if the entity isn't itself a monopoly (Anti-Trust).

This is just all from a consumer point of view.

Just as an added point I would rather Apple innovate and get creative and competitive (price wise) with iBooks to combat Amazon. Instead they used App Store policy to make up for lost iBooks sales by charging Amazon.

The problem is that Apple is benefiting from the Kindle app in hardware sales.

The Kindle and Nook don't apply because these devices were not created and marketed as portable computing devices but a single focus e-reader. Apple created the iPad (iPhone to some extent) to be just that. A portable computing device with apps galore to go along with it. And it succeeded in that.

They also marketed heavily on the fact it too can be an e-reader but now it wants sole control of the e-reading capability. So which is it? Is the iPad a device to control the e-reading market with the bonus of apps, music etc? Or is the iPad supposed to be a portable computing device that lets you choose what apps to put on it?

It seems like a bit of identity crisis at this point. It also seems like an attempt to leverage the device for a cut of Amazon sales that cost Apple nothing except for iBooks sales in return. This is definitely anti-competitive and it smacks of disbelief that iBooks can tackle Amazon which is a shame since I would expect more of Apple.

Legal ramifications, I don't give a crap. Like I said, point of view from a consumer.

Just as an added point I would rather Apple innovate and get creative and competitive (price wise) with iBooks to combat Amazon. Instead they used App Store policy to make up for lost iBooks sales by charging Amazon.

Apple is leveraging a monopoly position (control of all iOS applications) to unfairly disadvantage a competitor in another sector (iBooks vs Kindle). Two examples of similar cases: Internet Explorer bundling (banning of Netscape), and Google Adsense prioritizing. Microsoft utilized their monopoly (sole provider of the critical Windows Operating System) to unfairly disadvantage their competitor (Internet Explorer vs Netscape Navigator), were found liable, and forced to pay by the antitrust court. Google's case is ongoing.

I'm an Apple user and I don't like this decision at all, but I think its you who isn't exactly an expert in anti-trust. Having absolute control of iOS in no way makes Apple a monopoly. The relevant market is "mobile devices" of which iOS is, as was quoted before, around 4%. Even if you use the market of "smartphones" Apple doesn't even have a plurality never mind a majority or monopoly. Even if you look at "mobile devices that are capable of displaying ebooks", which might be the most salient category Apple has the market share lead in, its still not a majority.

No US court is even remotely going to give Apple the anti-trust slap down on this one.

As was mentioned, market share is irrelevant to the determination of antitrust. But even if it was relevant, the competing market absolutely is not mobile devices. Feature phones and their ilk are not even remotely comparable to smartphones. The competing market would be iOS/Android/BB/WP7/Symbian/WebOS devices. Most notably, this would include the iPod touch and iPad (as well as Android PMPs and tablets). Once you round all those out, you're looking much closer to a 70%-80% market share, which would at least qualify as a dominant firm monopoly.